We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Federal Realty Investment Trust (NYSE:FRT) and determine whether hedge funds skillfully traded this stock.
Federal Realty Investment Trust (NYSE:FRT) was in 24 hedge funds' portfolios at the end of March. FRT has seen an increase in enthusiasm from smart money lately. There were 22 hedge funds in our database with FRT positions at the end of the previous quarter. Our calculations also showed that FRT isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are many indicators market participants use to assess stocks. Two of the most innovative indicators are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the top picks of the best fund managers can outperform the S&P 500 by a significant margin (see the details here).
[caption id="attachment_844243" align="aligncenter" width="400"] Donald Sussman of Paloma Partners[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. With all of this in mind we're going to take a peek at the latest hedge fund action regarding Federal Realty Investment Trust (NYSE:FRT).
Hedge fund activity in Federal Realty Investment Trust (NYSE:FRT)
Heading into the second quarter of 2020, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards FRT over the last 18 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Federal Realty Investment Trust (NYSE:FRT), which was worth $18.7 million at the end of the third quarter. On the second spot was Carlson Capital which amassed $16.7 million worth of shares. Winton Capital Management, AQR Capital Management, and Adage Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Weld Capital Management allocated the biggest weight to Federal Realty Investment Trust (NYSE:FRT), around 0.69% of its 13F portfolio. Gillson Capital is also relatively very bullish on the stock, earmarking 0.52 percent of its 13F equity portfolio to FRT.
As aggregate interest increased, specific money managers have been driving this bullishness. Carlson Capital, managed by Clint Carlson, created the most outsized position in Federal Realty Investment Trust (NYSE:FRT). Carlson Capital had $16.7 million invested in the company at the end of the quarter. John Overdeck and David Siegel's Two Sigma Advisors also initiated a $2.4 million position during the quarter. The following funds were also among the new FRT investors: Minhua Zhang's Weld Capital Management, Paul Marshall and Ian Wace's Marshall Wace LLP, and Ray Dalio's Bridgewater Associates.
Let's now take a look at hedge fund activity in other stocks similar to Federal Realty Investment Trust (NYSE:FRT). We will take a look at AMERCO (NASDAQ:UHAL), argenx SE (NASDAQ:ARGX), Elbit Systems Ltd. (NASDAQ:ESLT), and Horizon Therapeutics Public Limited Company (NASDAQ:HZNP). This group of stocks' market valuations match FRT's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UHAL,15,318275,-2 ARGX,25,588505,-1 ESLT,6,13855,3 HZNP,41,1686085,8 Average,21.75,651680,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $652 million. That figure was $78 million in FRT's case. Horizon Therapeutics Public Limited Company (NASDAQ:HZNP) is the most popular stock in this table. On the other hand Elbit Systems Ltd. (NASDAQ:ESLT) is the least popular one with only 6 bullish hedge fund positions. Federal Realty Investment Trust (NYSE:FRT) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately FRT wasn't nearly as popular as these 10 stocks and hedge funds that were betting on FRT were disappointed as the stock returned 15.6% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.